Posted on
April 17th, 2014

Google’s profits down

Despite reporting profits of $3.45bn (£2.05bn), the technology giant Google’s shares have dropped 5%. Speculations for why this has happened have led to some interesting conclusions.

With Google’s recent branching out to developing drones, Google Glass and phones as well as thermostats and fire alarms, analyst Larry Magid has stated to the BBC: “Some of these crazy ideas need to become less crazy and more profitable. Their core business, what really brings in the money, that’s beginning to get a little bit dodgy for them.”

The core business he refers to is Google’s “cost per click” advertising facility, where companies or marketers pay Google for prime spots within the search engine ranking positions, charging for each potential customers click through to the website. This main source of Google’s net based income has seen a decline of 9% in revenue – whether or not this is due to fewer users clicking or good SEO for other brands that haven’t paid per click is something that could do with review.

Marketers are also proving to be reluctant to pay as much for ads on mobile devices than they are for desktop machines. These ads are reported to cost almost half of what a desktop ad would. Although it is understandable that Google would want to charge as much for these adds as they can as an increasing amount of people are converting to mobile devices for browsing and purchasing on the web.

There are other financial mistakes which investors would have been keeping an eye on, such as the sale of Motorola Mobility, the smartphone making company to Lenovo for $3bn after buying it for $12bn two years ago. What drove them to this seemingly rash sale may be that Google’s reported profits aren’t an accurate reflection of their true earnings, or simply that the project didn’t suit them and they only required enough money to put into to other projects. This can only remain as speculation of course.

Yet Google chief executive Larry Page still manages to remain upbeat saying “We completed another great quarter,” which is true in terms of profit. He goes on to excitedly announce that good progress is being made with their emerging businesses and that product development has continued for their mobile services.

Perhaps investors have jumped the gun a bit, although it has seemed over the past few years that Google has bought up technology companies a bit haphazardly. Perhaps with their enthusiasm for innovation and design we may begin to see them regain investors once they have released more products onto the market, hopefully at more affordable prices.

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